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Shell goes solo in NW Shelf sales pitch: Thursday 8 December 2005

December 08, 2005

THE partners in the North West Shelf liquefied natural gas project may ditch their united marketing program to individually promote their share of production instead.

While a united marketing approach had made sense until now, a sellers' market for LNG could encourage some partners to eventually go it alone, said Tim Warren, chairman of Shell Australia, one of the six partners in the North West Shelf. Shell is also a partner in the rival Gorgon LNG development, off northwest Australia, where the three partners have agreed to market their gas separately.

Shell will sell its share in the US, while ChevronTexaco is dealing in Asia. ExxonMobil has yet to secure any deals but is believed to be targeting the US.

Mr Warren said yesterday that the joint approach at the North West Shelf, in place since 1989, had helped it secure the massive $25 billion Chinese supply contract in 2002, but the model had its disadvantages.

He said it could take a long time to agree on marketing strategies and it was difficult to align sales with individual company objectives.

"In equity selling, you each go into the market to achieve your own objectives," Mr Warren said.

He said that the key to equity marketing was having confidence in the ability of partners to secure sales deals. Given strong demand in Asia and the US, he said, equity marketing would become more prevalent.

The new strategy could be on the agenda at the Shelf if a sixth processing train were built, or when the next major marketing program came up.

But a sixth train may not eventuate until 2020, and Shelf partners are already renegotiating long-term contracts that expire in 2009.

Mr Warren said that the Chinese had been "caught off guard" by rising LNG prices. But he expected that, having pulled back from the market, the economic giant would eventually return.

In April, China National Offshore Oil Corp backed out of a deal to buy LNG from Gorgon but was replaced by Japanese buyers.

Mr Warren said Shell was boosting its gas exploration effort in Australia and had doubled its workforce in Perth.

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